BANGKOK—Thailand’s ruling junta entered a new phase in its attempts to reshape the country as its rubber-stamp parliament impeached former leader
Yingluck Shinawatra
and state prosecutors said they would press criminal charges for her role in a botched rice subsidy program.

Political analysts said the moves might cement the junta’s hold on power as it pushes back elections that it had earlier promised for later this year. But they will also make it more difficult for the retired generals who run the country to paint themselves as neutral reformers, as they have tried to do since seizing power amid mass street protests last May.

Core members of the junta have privately said they are especially worried about a backlash in the so-called “Red Shirt” heartlands in the north and northeast of the country where support remains strong for Ms. Yingluck and her billionaire brother, former Prime Minister
Thaksin Shinawatra,
who was removed in a 2006 coup. Analysts say tensions appear set to grow after Thailand’s legislature prohibited Ms. Yingluck from seeking office for five years. The attorney general’s move to file criminal charges means she could face up to 10 years in prison if convicted. Ms. Yingluck responded by saying the charges are designed to silence her. “Today democracy in Thailand died, and so did rule of law,” she wrote on her verified Facebook page.

So far, there has been little in the way of a visible response from grass roots Red Shirt leaders, or from Mr. Thaksin, who lives overseas. Some have said they intend to bide their time; martial law is still in effect, outlawing gatherings of five or more people.

But they also say there is a longer-term threat to the stability of Thailand’s military-installed regime: the fragile state of what was once one of Asia’s most vibrant economies.

Gen. Prayuth Chan-ocha would have been hard pressed to have chosen a worse to time to launch the coup that later installed him as prime minister. The country was already experiencing the early part of an export slump. Tourism, too, was sputtering after the months of street protests and riots that preceded the putsch.

The rice debacle also contributed to the malaise. Ms. Yingluck’s administration sought to buy rice from farmers at up to twice the market price and stockpile it, in an effort to drive global prices higher. Thailand was the world’s largest exporter of the grain at the time. Instead, India and Vietnam stepped up shipments and global prices fell, leaving Thailand with a paper loss of about $15 billion, in addition to a trail of corruption allegations. In some cases, investigators say rice smuggled from neighboring Laos and Cambodia was sold to the government at premium prices.

With the economy’s slide worsening and deflation becoming a real prospect as 2015 gets under way, the question heard more in Bangkok, from both rich and poor Thais, is, How much more pain can the economy absorb?

It is already growing slower than some neighbors, including Malaysia, Vietnam and Indonesia. The central bank says that exports, the engine of the Thai economy, shrank in 2014, and it recently cut its export-growth forecast for this year to 1% from 4%.

That is a big red flag in a country where exports make up about 60% of gross domestic product. Part if the problem is that global demand is soft. But economists also note that some foreign investors, such as Toyota Motor Co., once resolutely committed to Thailand, are increasingly diversifying their manufacturing bases to places such as Indonesia. Worse, industries in which Thailand excels, such as making hard disk drives, are falling out of favor as manufacturers switch to newer alternatives such as flash drives.

So far, 60-year-old Gen. Prayuth hasn’t sought much help beyond a narrow group mostly composed of former military men and aristocrats. A number of business leaders have also advised the junta in both formal and informal capacities. An executive vice president from Bangkok Bank, for instance, serves on an advisory panel, while leading tycoons have met privately with Gen. Prayuth, according to people familiar with the matter. But the rollout of new government spending plans to buoy the economy have been much slower to materialize than many of the junta’s supporters might have hoped.

Analysts such as Pavin Chachavalpongpun at Kyoto University in Japan, whose Thai passport was revoked by the junta for some of his political comments, say businesses aren’t likely to push back against Gen. Prayuth, at least not for now. Many enterprises were largely supportive of the coup, which helped restore some stability after the frequently violent protests against Ms. Yingluck’s government. Concerns are also growing about the uncertain consequences of a royal succession. Influential
King Bhumibol Adulyadej,
now 87 years old, is in poor health. Many wealthier Thais might be willing to trade growth for political stability, even if it means prolonging Gen. Prayuth’s hold on power.

But the disconnect between the junta’s portrayal of itself as a peacemaker and the prosecution of Ms. Yingluck is widening, some analysts say.

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People who know Thailand’s leader say Gen. Prayuth relishes being in control, although they add that he feels he was forced to take action after last year’s chaotic street protests. When Gen. Prayuth announced the coup to a roomful of bickering politicians last May, he simply said, “Right, that’s it. I’m in charge,” according to two people who were there.

When he formally stepped down as army chief in September after reaching the mandatory retirement age of 60, he said he was looking forward to lecturing his houseplants instead of his troops.

“He’s a man’s man and can actually be very funny. The rank-and-file in the army adore him,” said one diplomat who has met with Gen. Prayuth. Some Thais enjoy his occasionally unorthodox behavior. A video clip of him tugging at a television sound man’s ear as he knelt before the premier to provide a clear camera shot went viral. Other footage of Gen. Prayuth that made the rounds on social media included a scene where he threw a half-eaten banana at reporters.

But the longer it takes to return the country to some form of democracy—and the longer it takes to revive Thailand’s flagging economy—the greater the risk that Gen. Prayuth might outstay his welcome among Thais who originally backed him.

“If it goes on too long, and especially if the economy gets worse, it’s going to be harder to justify,” Mr. Pavin said.

—Warangkana Chomchuen and Nopparat Chaichalearmmongkol contributed to this article.

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